UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 27, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____________________To ____________________
Commission File Number 0-01859
KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Michigan (State of Incorporation) 2700 Oak Industrial Drive, NE Grand Rapids, Michigan (Address of principal executive offices) |
38-0722920 (IRS Employer Identification No.) 49505 (Zip Code) |
(616) 459-3311
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES NO X
As of January 16, 2004, Knape & Vogt Manufacturing Company had 2,325,379 shares of Common Stock outstanding and 2,190,970 shares of Class B Common Stock outstanding.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No. | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. Financial Statements | ||||
Condensed Consolidated Balance Sheets | ||||
--December 27, 2003 and June 28, 2003 | 2 | |||
Condensed Consolidated Statements of Income | ||||
--Six Months and Three Months Ended December 27, 2003 and December 28, 2002 | 3 | |||
Condensed Consolidated Statement of Stockholders' Equity | ||||
--Six Months Ended December 27, 2003 | 4 | |||
Condensed Consolidated Statements of Cash Flows | ||||
--Six Months and Three Months Ended December 27, 2003 and December 28, 2002 | 5 | |||
Notes to Condensed Consolidated Financial Statements | 6- | 10 | ||
Item 2. Management's Discussion and Analysis of Financial | ||||
Condition and Results of Operations | 11 | -14 | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 15 | |||
Item 4. Controls and Procedures | 16 | |||
PART II. OTHER INFORMATION | ||||
Item 1. Legal Proceedings | 17 | |||
Item 4. Submission of Matters to a Vote of Security Holders | 17 | |||
Item 6. Exhibits and Reports on Form 8-K | 17 | -18 | ||
SIGNATURES | 19 | |||
EXHIBIT INDEX | 20 |
1
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) Dec. 27, 2003 | June 28, 2003 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash | $ | 4,583,171 | $ | 3,846,611 | |||||||
Accounts receivable - net | 16,862,223 | 16,820,600 | |||||||||
Inventories | 21,218,846 | 18,979,056 | |||||||||
Prepaid expenses and other current assets | 1,507,187 | 731,751 | |||||||||
Total current assets | 44,171,427 | 40,378,018 | |||||||||
Property, plant and equipment | 83,712,883 | 83,660,365 | |||||||||
Less accumulated depreciation | 52,505,983 | 49,671,256 | |||||||||
Net property, plant and equipment | 31,206,900 | 33,989,109 | |||||||||
Goodwill | 4,772,837 | 4,772,837 | |||||||||
Prepaid pension cost | 12,299,906 | 12,503,491 | |||||||||
Other assets | 650,417 | 705,374 | |||||||||
$ | 93,101,487 | $ | 92,348,829 | ||||||||
Liabilities and Stockholders Equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 11,266,032 | $ | 10,746,892 | |||||||
Other accrued liabilities | 9,402,480 | 9,173,857 | |||||||||
Total current liabilities | 20,668,512 | 19,920,749 | |||||||||
Long-term debt and capital leases | 24,046,310 | 24,052,605 | |||||||||
Deferred income taxes and other long-term liabilities | 13,399,120 | 13,613,613 | |||||||||
Total liabilities | 58,113,942 | 57,586,967 | |||||||||
Stockholders Equity | |||||||||||
Common stock (Common - 2,324,379 and 2,293,433 shares issued and | |||||||||||
outstanding, Class B common - 2,191,970 and 2,222,202 shares | |||||||||||
issued and outstanding) | 9,032,698 | 9,031,270 | |||||||||
Preferred stock-unissued | - | - | |||||||||
Additional paid-in capital | 7,544,749 | 7,538,684 | |||||||||
Unearned stock grant | (94,500 | ) | (94,500 | ) | |||||||
Accumulated other comprehensive loss | (2,444,214 | ) | (2,974,989 | ) | |||||||
Retained earnings | 20,948,812 | 21,261,397 | |||||||||
Total stockholders equity | 34,987,545 | 34,761,862 | |||||||||
$ | 93,101,487 | $ | 92,348,829 | ||||||||
See accompanying notes.
2
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Six Months Ended | For the Three Months Ended | |||||||||||||
Dec. 27, 2003 | Dec. 28, 2002 | Dec. 27, 2003 | Dec. 28, 2002 | |||||||||||
Net sales | $ | 70,623,673 | $ | 61,218,080 | $ | 34,498,436 | $ | 30,219,890 | ||||||
Cost of sales | 56,143,077 | 47,583,496 | 27,182,375 | 23,639,237 | ||||||||||
Gross profit | 14,480,596 | 13,634,584 | 7,316,061 | 6,580,653 | ||||||||||
Selling and administrative expenses | 11,962,694 | 11,071,891 | 6,062,245 | 4,921,448 | ||||||||||
Severance | - | 271,325 | - | - | ||||||||||
Operating income | 2,517,902 | 2,291,368 | 1,253,816 | 1,659,205 | ||||||||||
Interest and other expenses, net | 839,627 | 636,815 | 446,698 | 317,769 | ||||||||||
Income before income taxes | 1,678,275 | 1,654,553 | 807,118 | 1,341,436 | ||||||||||
Income taxes | 566,497 | 607,862 | 365,214 | 489,708 | ||||||||||
Net income | $ | 1,111,778 | $ | 1,046,691 | $ | 441,904 | $ | 851,728 | ||||||
Basic and diluted earnings per share | $ | 0.25 | $ | 0.23 | $ | 0.10 | $ | 0.19 | ||||||
Weighted average shares outstanding | 4,516,137 | 4,517,472 | 4,516,349 | 4,517,480 | ||||||||||
Cash dividend - common stock | $ | .33 | $ | .33 | $ | .165 | $ | .165 | ||||||
Cash dividend - Class B common stock | $ | .30 | $ | .30 | $ | .15 | $ | .15 | ||||||
See accompanying notes.
3
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Common stock |
Additional paid-in capital |
Unearned stock grant | Accummulated other comprehensive loss |
Retained earnings |
Total | |||||||||||||||||||||
Balance, June 28, 2003 | $ | 9,031,270 | $ | 7,538,684 | $ | (94,500 | ) | $ | (2,974,989 | ) | 21,261,397 | $ | 34,761,862 | |||||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Net income | - | - | - | - | 1,111,778 | 1,111,778 | ||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 135,248 | - | |||||||||||||||||||||
Gain on derivative instrument | - | - | - | 395,527 | - | |||||||||||||||||||||
Other comprehensive income | - | - | - | 530,775 | - | 530,775 | ||||||||||||||||||||
Comprehensive income | 1,642,553 | |||||||||||||||||||||||||
Cash dividends | - | - | - | - | (1,424,363 | ) | (1,424,363 | ) | ||||||||||||||||||
Restricted stock issued | 1,428 | 6,065 | - | - | - | 7,493 | ||||||||||||||||||||
Balance, December 27, 2003 | $ | 9,032,698 | $ | 7,544,749 | $ | (94,500 | ) | $ | (2,444,214 | ) | $ | 20,948,812 | $ | 34,987,545 | ||||||||||||
See accompanying notes.
4
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | ||||||||
Dec. 27, 2003 | Dec. 28, 2002 | |||||||
Operating Activities: | ||||||||
Net income | $ | 1,111,778 | $ | 1,046,691 | ||||
Non-cash items: | ||||||||
Depreciation and amortization | 3,278,015 | 3,552,611 | ||||||
Deferred income taxes | 205,319 | 265,000 | ||||||
Prepaid pension cost | 203,585 | 52,234 | ||||||
Other long-term liabilities, net | (30,801 | ) | 15,448 | |||||
Severance | - | 271,325 | ||||||
Loss (gain) on disposal of fixed assets | (4,349 | ) | 87,615 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 69,089 | 2,486,180 | ||||||
Inventories | (2,239,790 | ) | (728,134 | ) | ||||
Other current assets | (774,469 | ) | 354,174 | |||||
Accounts payable and accrued expenses | 1,013,613 | (3,238,818 | ) | |||||
Net cash provided by operating activities | 2,831,990 | 4,164,326 | ||||||
Investing Activities: | ||||||||
Additions to property, plant and equipment | (764,415 | ) | (1,634,228 | ) | ||||
Proceeds from sales of property, plant and equipment | 800 | 243,527 | ||||||
Other | (21,962 | ) | (21,411 | ) | ||||
Net cash used for investing activities | (785,577 | ) | (1,412,112 | ) | ||||
Financing Activities: | ||||||||
Dividends paid | (1,424,363 | ) | (1,423,152 | ) | ||||
Repurchase and retirement of common stock | - | (5,934 | ) | |||||
Payments on long-term debt and capital leases | (6,295 | ) | - | |||||
Net cash used for financing activities | (1,430,658 | ) | (1,429,086 | ) | ||||
Effect of Exchange Rate Changes on Cash | 120,805 | (80,276 | ) | |||||
Net Increase in Cash and Equivalents | 736,560 | 1,242,852 | ||||||
Cash and equivalents, beginning of year | 3,846,611 | 5,430,543 | ||||||
Cash and equivalents, end of period | $ | 4,583,171 | $ | 6,673,395 | ||||
Cash Paid During the Period - interest | $ | 768,199 | $ | 710,862 | ||||
- income taxes | 160,936 | - |
See accompanying notes.
5
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited condensed consolidated financial statements have been prepared reflecting all adjustments, which are, in the opinion of management, necessary for a fair presentation of the statements of financial position, results of operations and cash flows and consist of only normal recurring adjustments. Interim results are not necessarily indicative of the results for the year-end and are subject to year-end adjustments, and audit by independent public auditors. The condensed consolidated financial statements and notes should be read in conjunction with the Companys 2003 annual report.
The Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end of June. The fiscal year ended June 28, 2003 contained 52 weeks, while the fiscal year ending July 3, 2004 will contain 53 weeks. Both six-month periods ended on December 27, 2003 and December 28, 2002 contained 26 weeks.
Certain prior year information has been reclassified to conform to the current year presentation.
In April 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. This statement had no material effect on the financial statements.
In December 2003, the FASB revised SFAS No. 132 Employers Disclosure about Pension and Other Post Retirement Benefits. This statement requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit costs of defined benefit pension plans and other defined benefit postretirement plans. The provisions of this statement regarding interim disclosures will be effective for the Company in the quarter ended March 27, 2004. The year-end provisions of this statement will be effective for the Company for the year ended July 3, 2004. Management expects this statement will impact the Companys interim and year-end disclosures related to its defined benefit pension plans.
The Company uses an interest rate swap agreement to modify a portion of the variable rate revolving line of credit to a fixed rate obligation, thereby reducing the exposure to market rate fluctuations. The interest rate swap agreement is designated as a hedge, and effectiveness is determined by matching the principal balance and terms with that specific obligation. Amounts currently due to or from interest-rate-swap-counter parties are recorded in interest expense in the period in which they accrue. The derivative was recognized as a liability on the balance sheet at its fair value of $1,947,453 at December 27, 2003 and $2,554,980 at June 28, 2003.
The Company has 6,000,000 shares of common stock and 4,000,000 shares of Class B common stock authorized. All of the stock is $2 par/share.
The following are the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS) for each of the periods presented:
6
For the six months ended | For the three months ended | ||||||||
Dec. 27, 2003 | Dec. 28, 2002 | Dec. 27, 2003 | Dec. 28, 2002 | ||||||
Numerators: | |||||||||
Numerator for both basic and | |||||||||
diluted EPS, net income | $ 1,111,778 | $ 1,046,691 | $ 441,904 | $ 851,728 | |||||
Denominators: | |||||||||
Denominator for both basic and | |||||||||
diluted EPS,weighted-average | |||||||||
common shares outstanding | 4,516,137 | 4,517,472 | 4,516,349 | 4,517,480 | |||||
The following exercisable stock options were not included in the computation of diluted EPS because the option prices were greater than average quarterly market prices.
Dec. 27, 2003 | Dec. 28, 2002 | ||||
Exercise Price | |||||
$13 | .64 | 6,050 | 13,396 | ||
$14 | .09 | 7,700 | 9,900 | ||
$16 | .74 | 6,054 | 7,870 | ||
$18 | .18 | 5,500 | 7,150 | ||
$18 | .41 | 130,240 | 130,240 | ||
$18 | .48 | 206,183 | - | ||
$26 | .54 | - | 61,413 |
Inventories are valued at the lower of FIFO (first-in, first-out) cost or market. Inventories are summarized as follows:
Dec. 27, 2003 | June 28, 2003 | ||||
Finished products | $16,365,199 | $13,918,677 | |||
Work in process | 1,718,419 | 1,746,149 | |||
Raw materials | 3,135,228 | 3,314,230 | |||
Total | $21,218,846 | $18,979,056 | |||
The Company estimates the amount of warranty claims on sold product that may be incurred based on current and historical data. The actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents the changes in the Companys product warranty liability:
For the Six Months Ended | For the Three Months Ended | ||||||||
Dec. 27, 2003 | Dec. 28, 2002 | Dec. 27, 2003 | Dec. 28, 2002 | ||||||
Accrued warranty costs at beginning of period | $ 275,195 | $ 234,615 | $ 275,001 | $ 234,615 | |||||
Payments made for warranty costs | (103,181 | ) | (64,434 | ) | (44,317 | ) | (25,054 | ) | |
Accrual for product warranty | 104,391 | 64,903 | 45,721 | 25,523 | |||||
Accrued warranty costs at end of period | $ 276,405 | $ 235,084 | $ 276,405 | $ 235,084 | |||||
Comprehensive income represents net income and other revenues, expenses, gains and losses that are excluded from net income and recognized directly as a component of stockholders equity.
7
Comprehensive income and its components consist of the following:
For the Six Months Ended | For the Three Months Ended | ||||||||
Dec. 27, 2003 | Dec. 28, 2002 | Dec. 27, 2003 | Dec. 28, 2002 | ||||||
Net income | $ 1,111,778 | $ 1,046,691 | $ 441,904 | $ 851,728 | |||||
Other comprehensive income: | |||||||||
Foreign currency translation adjustment | 135,248 | (83,627 | ) | 138,785 | 12,186 | ||||
Gain (loss) on derivative instrument | 395,527 | (598,264 | ) | 165,834 | (39,093 | ) | |||
Minimum SERP liability adjustment | - | 913 | - | (127 | ) | ||||
Comprehensive income | $ 1,642,553 | $ 365,713 | $ 746,523 | $ 824,694 | |||||
Other comprehensive income (loss) related to the interest rate swap agreement consisted of the following components:
For the Six Months Ended | For the Three Months Ended | ||||||||||||||||
Dec. 27, 2003 | Dec. 28, 2002 | Dec. 27, 2003 | Dec. 28, 2002 | ||||||||||||||
Pre-Tax | After-Tax | Pre-Tax | After-Tax | Pre-Tax | After-Tax | Pre-Tax | After-Tax | ||||||||||
Change in fair value of interest rate swap | $1,113,311 | $724,287 | $(471,587 | ) | $(307,274 | ) | $509,784 | $331,551 | $169,438 | $109,452 | |||||||
Settlement to interest expense | (505,784 | ) | (328,760 | ) | (447,677 | ) | (290,990 | ) | (254,950 | ) | (165,717 | ) | (228,531 | ) | (148,545 | ) | |
Other comprehensive income (loss) | $607,527 | $395,527 | $(919,264 | ) | $(598,264 | ) | $254,834 | $165,834 | $(59,093 | ) | $(39,093 | ) | |||||
The following table presents information about the results of operations for each of the Companys reportable segments for the six months and three months ended December 27, 2003 and December 28, 2002, respectively.
For the Three Months Ended: | Office Products | Home and Commercial Products | Corporate and Other | Consolidated Total | ||||||
Dec. 27, 2003: | ||||||||||
Net sales to external customers | $ 22,735,791 | $47,887,882 | $ - | $70,623,673 | ||||||
Income tax expense (benefit) | (873,361 | ) | 2,447,397 | (1,007,539 | ) | 566,497 | ||||
Net income (loss) | (1,485,923 | ) | 3,946,240 | (1,348,539 | ) | 1,111,778 | ||||
Total assets | 12,641,876 | 26,335,650 | 54,123,961 | 93,101,487 | ||||||
Goodwill | 4,250,936 | 521,901 | - | 4,772,837 | ||||||
Depreciation and amortization | 111,682 | 51,295 | 3,115,038 | 3,278,015 | ||||||
Capital expenditures | 159,872 | 133,685 | 470,858 | 764,415 | ||||||
Dec. 28, 2002: | ||||||||||
Net sales to external customers | 18,583,259 | 42,634,821 | - | 61,218,080 | ||||||
Income tax expense (benefit) | 383,907 | 2,440,683 | (2,216,728 | ) | 607,862 | |||||
Net income (loss) | 680,263 | 4,076,732 | (3,710,304 | ) | 1,046,691 | |||||
Goodwill | 4,250,936 | 521,901 | - | 4,772,837 |
8
For the Six Months Ended: | Office Products | Home and Commercial Products | Corporate and Other | Consolidated Total | ||||||
Dec. 27, 2003: | ||||||||||
Net sales to external customers | $ 10,854,914 | $23,643,522 | $ - | $34,498,436 | ||||||
Income tax expense (benefit) | (373,636 | ) | 1,165,553 | (426,703 | ) | 365,214 | ||||
Net income (loss) | (613,407 | ) | 1,846,942 | (791,631 | ) | 441,904 | ||||
Total assets | 12,641,876 | 26,335,650 | 54,123,961 | 93,101,487 | ||||||
Goodwill | 4,250,936 | 521,901 | - | 4,772,837 | ||||||
Depreciation and amortization | 87,247 | 23,455 | 1,536,547 | 1,647,249 | ||||||
Capital expenditures | 107,161 | 133,685 | 83,082 | 323,928 | ||||||
Dec. 28, 2002: | ||||||||||
Net sales to external customers | 9,031,546 | 21,188,344 | - | 30,219,890 | ||||||
Income tax expense (benefit) | 381,366 | 1,290,069 | (1,181,727 | ) | 489,708 | |||||
Net income (loss) | 677,689 | 2,107,668 | (1,933,629 | ) | 851,728 | |||||
Goodwill | 4,250,936 | 521,901 | - | 4,772,837 |
During the second quarter of fiscal 2004, management developed a further breakdown of the channel results that comprise the Home & Commercial Products and Office Products divisions. Management has limited its review of the channels to net sales to external customers and operating profit before administrative costs as shown below. Due to the complexity in obtaining this information for prior years, restatement of prior year results by channel is impracticable.
OFFICE PRODUCTS | ||||||||
For the Six Months Ended | For the Three Months Ended | |||||||
December 27, 2003: | OEM | Dealer | Un-allocated | Total | OEM | Dealer | Un-allocated | Total |
Net sales to external customers | $18,058,331 | $4,677,460 | $ - | $22,735,791 | $8,635,062 | $2,219,852 | $ - | $10,854,914 |
Operating profit before administrative costs, other expenses and income taxes | (2,374,270) | 599,144 | - | (1,775,126) | (1,004,272) | 316,220 | - | (688,052) |
Administrative costs, other expenses and income taxes | - | - | (289,203) | (289,203) | - | - | (74,645) | (74,645) |
Net income (loss) | - | - | - | $(1,485,923) | - | - | - | $(613,407) |
HOME AND COMMERCIAL | ||||||||
For the Six Months Ended | For the Three Months Ended | |||||||
Net sales to external customers | $15,944,412 | $31,943,470 | $ - | $47,887,882 | $7,777,722 | $15,865,800 | $ - | $23,643,522 |
Operating profit before administrative costs, other expenses and income taxes | 609,704 | 6,446,695 | - | 7,056,399 | 414,358 | 2,937,681 | - | 3,352,039 |
Administrative costs, other expenses and income taxes | - | - | 3,110,159 | 3,110,159 | - | - | 1,505,097 | 1,505,097 |
Net income (loss) | - | - | - | $3,946,240 | - | - | - | $1,846,942 |
9
On August 28, 2003, the Company entered into a new $35 million revolving credit facility that matures on November 1, 2006. The new three-year revolving credit facility is unsecured and replaces a $45 million credit facility that would have expired in 2004. Interest rates on outstanding loans under the revolving credit facility are either based on the London Interbank Offering Rate (LIBOR), plus a negotiated spread over LIBOR, or at the U.S. prime rate. The new agreement requires the Company to pay a non-use fee on amounts not outstanding under the credit facility based on a ratio of the Companys adjusted total debt (funded debt less cash and cash equivalents) to EBITDA (earnings before interest, income taxes, depreciation and amortization).
The Canada Customs and Revenue Agency (CCRA) has performed an audit of the Companys sales to its wholly-owned subsidiary, Knape & Vogt Canada. Preliminary results from a joint review by the Company and its customs broker indicate that the Company may be liable for certain customs transactions, however, the amount of any such potential liability is unknown at this time. The Company is defending its position that Knape & Vogt Canada is the importer of record for all Knape & Vogt goods shipped into Canada and management believes, that based on the information available at this time, any liability owed to the CCRA will not have a material adverse effect on the Companys earnings.
The Company was sued in the Kent County, Michigan Circuit Court in 1997 by a former employee seeking additional benefits under an executive retirement plan. The Circuit Court ruled in favor of the plaintiff, but in June 2002, the Circuit Court was reversed on the Companys appeal to the Michigan Court of Appeals. The plaintiff filed a delayed request for leave to appeal to the Michigan Supreme Court. In August 2002, the plaintiff filed a lawsuit seeking these retirement benefits in the Federal District Court for the Western District of Michigan. During the fourth quarter of fiscal 2003, the plaintiffs request for leave to appeal to the Michigan Supreme Court was denied. The Company moved to dismiss the federal litigation based on the statute of limitations. In September 2003, the Federal District Court dismissed the litigation. In October 2003, the plaintiff filed an appeal to the Sixth Circuit Court of Appeals stating that the statute of limitations should not have applied to this case. Management believes that this case will not have a material adverse affect on the Companys earnings.
The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.
10
Certain matters discussed in this section include forward-looking statements involving risks and uncertainties. When used in this document, the words believes, expects, anticipates, goal, think, forecast, project, and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning future revenue, net income growth, cash flows and capital expenditures. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this report.
Net sales for the second quarter of fiscal 2004 were $34.5 million compared to $30.2 million for the same period in the prior year. Net sales for the first six months of fiscal 2004 were $70.6 million, compared to $61.2 million in the prior year.
During the second quarter of fiscal 2004, the Home and Commercial division had net sales of $23.6 million compared to $21.2 million in the second quarter of fiscal 2003. Net sales for the first six months of fiscal 2004 were $47.9 million compared to $42.6 million for the same period in the prior year. Year to date through December 27, 2003, the division posted sales growth in all of the markets that it serves. New products, including the Shelf Made Instant Shelves, the new line of display ledges and the 4X4 Pocket Door heavy-duty precision drawer slides, assisted in expanding sales to existing customers and adding new customers. In addition, the Company continued to expand value-added programs such as its vendor-managed inventory capability.
The Office Products division had net sales of $10.9 million for the second quarter of fiscal 2004, compared to $9.0 million for the same period in the prior year. Net sales for the first six months of fiscal 2004 were $22.7 million compared to $18.6 million for the same period in the prior year. Business and Institutional Furniture Manufacturers Association (BIFMA) results for the period from July through November 2003, showed both flat shipments and orders when compared to the same period in the prior year. The Office Products division, however, increased its sales, during the six-month period and the quarter ended December 27, 2003, to both the original equipment manufacturer channel and the dealer channel. New products, including precision drawer slides specifically designed for individual customers and the new heavy-duty 8800 precision slide with the patented interlock system, provided the opportunities to grow sales and gain market share. Further, the Company introduced during the second quarter of fiscal 2004 to introduce its new line of height adjustable tables to both channels.
In total, the Company had new product sales of $4.4 million in the second quarter of fiscal 2004 compared to $2.5 million in the second quarter of fiscal 2003. New product sales for the first six months of fiscal 2004 increased to $9.8 million from $5.2 million in the same period of fiscal 2003.
Gross profit, as a percentage of net sales, was 21.2% for the second quarter and 20.5% for the first six months of fiscal 2004 compared to 21.8% and 22.3%, respectively, for the same periods in the prior year. During the second quarter, the Company began shipping new products to both consumer and distribution accounts. As part of the new commitments with these customers, the Company had to pay certain incentives to assist in the product conversion process. These payments reduced margins by approximately 1.0% in the second quarter. In addition, the Company recorded additional obsolescence reserves for certain slow moving products that reduced margins by .8% in the second quarter of fiscal 2004. These items were partially offset during the second quarter of fiscal 2004 by the Companys ability to better leverage its fixed overhead costs as a result of the increased sales volumes. The decline in gross profit for the six month period primarily reflected promotional incentives offered to new customers and to launch new products.
11
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Selling and administrative expenses, as a percentage of net sales, were 17.6% for the second quarter and 16.9% for the first six months of fiscal 2004 compared to 16.3% and 18.1% for the same periods in the prior year. During the second quarter of fiscal 2003, the Company recognized a pre-tax gain of $0.8 million due to the successful resolution of certain legal matters.
Excluding the unusual gain in fiscal 2003, the decrease in selling and administrative expense, as a percentage of sales, reflects the fact that the Company has been successful in its ability to leverage the fixed portion of its selling and administrative expenses, while growing sales. The Company remains committed to investing in both its sales force and the launch of its new products. Investments are being made in those products and markets where it believes that such investments will generate future growth.
Interest expense was $400,007 for the quarter and $789,938 for the six months ended December 27, 2003, compared to $360,822 and $718,260, respectively, for the same periods in the prior year. The increase reflects the higher level of borrowings outstanding under the Companys revolving credit facility.
Other expense was $46,691 for the quarter and $49,689 for the six months ended December 27, 2003, compared to other income of $43,053 and $81,445, respectively, for the same periods in the prior year. The expense in the current year resulted from exchange rate losses recorded on certain Canadian sales.
The effective tax rate was 45.2% for the second quarter of fiscal 2004 and 33.8% for the six months ended December 27, 2003 compared to 36.5% and 36.7%, respectively, for the same periods in the prior year. The effective rate for the second quarter of fiscal 2004 was unfavorably impacted by certain foreign tax obligations. This was offset for the six-month period by the review and subsequent adjustment of certain deferred tax valuation reserves that were deemed to no longer be necessary. The effective tax rate is anticipated to be between 37% and 38% for the remainder of the fiscal year.
Net income for the second quarter of fiscal 2004 was $441,904 or $0.10 per diluted share compared to $851,728, or $0.19 per diluted share for the same quarter of last year. Net income of $1.1 million, or $0.25 per diluted share was recorded for the first six months of fiscal 2004, compared to $1.0 million, or $0.23 per diluted share in the prior year. The net income for the second quarter of fiscal 2003 reflected the gain of approximately $0.5 million, or $0.12 per diluted share recognized as a result of resolving certain legal matters. Excluding this unusual item, net income improvement in fiscal 2004 reflects higher sales volumes, combined with the ability to leverage certain fixed selling and administrative expenses.
Net cash provided by operating activities for the first six months of fiscal 2004 was $2.8 million compared to $4.2 million for the first six months of fiscal 2003. The Company has invested over $2.0 million in inventory during the first six months of fiscal 2004 to support the launch of certain new products. Following the initial launch period, management will work to reduce this level of cash invested in inventory.
12
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Cash used for investing activities was $785,577 for the first six months of fiscal 2004, compared to $1.4 million used in the same period in the prior year. Capital expenditures totaled $764,415 for the six months ended December 27, 2003, compared to $1.6 million for the six months of the prior year. The capital expenditures for the six months of fiscal 2004 represented investments in tooling for new products, including certain new custom precision slides. There were no significant capital expenditure commitments at December 27, 2003. Capital expenditures for the fiscal year are anticipated to be approximately $3 million.
Cash used in financing activities was $1.4 million for the six months periods ended December 27, 2003 and December 28, 2002.
Anticipated cash flows from operations and available balances on the revolving credit line are expected to be adequate to fund working capital, capital expenditures, stock repurchases and dividend payments.
The following table summarizes long-term obligations as of December 27, 2003.
Payments due by period | ||||||||||||||
Total | Less than 1 year | 1-3 years | 4-5 years | |||||||||||
Long-term debt | $ | 24,000,000 | $ | - | $ | 24,000,000 | $ | |||||||
Capital lease | 67,954 | 16,988 | 33,977 | 16,989 | ||||||||||
Operating leases | 144,551 | 92,483 | 51,677 | 391 | ||||||||||
Purchase obligations | 353,026 | 353,026 | - | - | ||||||||||
Total contractual cash obligations | $ | 24,565,531 | $ | 462,497 | $ | 24,085,654 | $ | 17,380 | ||||||
In addition, we are a party to certain other agreements that contractually and unconditionally commit us to pay certain amounts in the future. While we believe it is probable that amounts will be spent in the future under such contracts, the amount and/or the timing of such future payments will vary depending on certain provisions of the applicable contract. The agreements to which we are a party that fall into this category include certain royalty agreements under which we pay a royalty based on the sales volume of certain products that we manufacture and sell.
The Canada Customs and Revenue Agency (CCRA) has performed an audit of the Companys sales to its wholly-owned subsidiary, Knape & Vogt Canada. Preliminary results from a joint review by the Company and its customs broker indicate that the Company may be liable for certain customs transactions, however, the amount of any such potential liability is unknown at this time. The Company is defending its position that Knape & Vogt Canada is the importer of record for all Knape & Vogt goods shipped into Canada and management believes, that based on the information available at this time, any liability owed to the CCRA will not have a material adverse effect on the Companys earnings.
13
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company was sued in the Kent County, Michigan Circuit Court in 1997 by a former employee seeking additional benefits under an executive retirement plan. The Circuit Court ruled in favor of the plaintiff, but in June 2002, the Circuit Court was reversed on the Companys appeal to the Michigan Court of Appeals. The plaintiff filed a delayed request for leave to appeal to the Michigan Supreme Court. In August 2002, the plaintiff filed a lawsuit seeking these retirement benefits in the Federal District Court for the Western District of Michigan. During the fourth quarter of fiscal 2003, the plaintiffs request for leave to appeal to the Michigan Supreme Court was denied. The Company moved to dismiss the federal litigation based on the statute of limitations. In September 2003, the Federal District Court dismissed the litigation. In October 2003, the plaintiff filed an appeal to the Sixth Circuit Court of Appeals stating that the statute of limitations should not have applied to this case. Management believes that this case will not have a material adverse affect on the Companys earnings.
The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.
In April 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. This statement had no material effect on the financial statements.
In December 2003, the FASB revised SFAS No. 132 Employers Disclosure about Pension and Other Post Retirement Benefits. This statement requires additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit costs of defined benefit pension plans and other defined benefit postretirement plans. The provisions of this statement regarding interim disclosures will be effective for the Company in the quarter ended March 27, 2004. The year-end provisions of this statement will be effective for the Company for the year ended July 3, 2004. Management expects this statement will impact the Companys interim and year-end disclosures related to its defined benefit pension plans.
This discussion and analysis of the Companys financial condition and results of its operations is based upon its consolidated financial statements. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts. On an ongoing basis, management evaluates the estimates, including those related to bad debts, inventories, long-lived assets, income taxes, self-insurance reserves, retirement benefits and contingencies and litigation. Management bases the estimates on historical experience and on various other assumptions and factors that they believe to be reasonable under the circumstances. Based on managements ongoing review, adjustments are made that are considered appropriate under the facts and circumstances. The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in the 2003 Annual Report on Form 10-K.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risks, which include changes in the Canadian dollar foreign currency exchange rate as measured against the U.S. dollar and changes in U.S. interest rates. The Company holds a derivative instrument in the form of an interest rate swap, which is viewed as a risk management tool and is not used for trading or speculative purposes. The intent of the interest rate swap is to effectively fix the interest rate on part of the borrowings under the Companys variable rate revolving credit agreement. The derivative was recognized as a liability on the balance sheet at its fair value of $1,947,453 at December 27, 2003 and $2,554,980 at June 28, 2003.
The following table provides information on the Companys fixed maturity investments as of December 27, 2003 that are sensitive to changes in interest rates. The table also presents the corresponding interest rate swap on this debt. Since the interest rate swap effectively fixes the interest rate on the notional amount of debt, changes in interest rates have no current effect on the interest expense recorded by the Company on the portion of the debt covered by the interest rate swap.
Liability | Amount | Maturity Date |
Variable rate revolving credit | ||
agreement | $24,000,000 | November 1, 2006 |
First $20,000,000 at an interest rate | ||
of 1.1781% (3 month LIBOR) | ||
plus weighted average | ||
credit spread of .95%; | ||
Next $4,000,000 at an interest rate of | ||
1.17% (1 month LIBOR) | ||
plus weighted average | ||
credit spread of .95%; | ||
Amounts in excess of $24,000,000 | ||
at the prime rate, currently | ||
4.0% | ||
Interest Rate Swap | ||
Notional amount | $20,000,000 | June 1, 2006 |
Pay/Receive variable | ||
at 3 month LIBOR - 1.17313% | ||
Pay fixed interest rate - 6.25% |
The Company has a sales office located in Canada. Sales are typically denominated in Canadian dollars, thereby creating exposures to changes in exchange rates. The changes in the Canadian/U.S. exchange rate may positively or negatively affect the Companys sales, gross margins and retained earnings. The Company attempts to minimize currency exposure through working capital management. The Company does not hedge its exposure to translation gains and losses relating to foreign currency net asset exposures.
15
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures | |
The Companys Chief Executive Officer and the Vice President of Finance, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) as of the end of the period covered by this Form 10-Q Quarterly Report have concluded that the Companys disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to them by others within the Company, particularly during the period in which this Form 10-Q Quarterly Report was being prepared. |
(b) Changes in Internal Controls | |
During the period covered by this report, there have been no changes in the Company's internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting. |
16
Item 1. Legal Proceedings
The Canada Customs and Revenue Agency (CCRA) has performed an audit of the Companys sales to its wholly-owned subsidiary, Knape & Vogt Canada. Preliminary results from a joint review by the Company and its customs broker indicate that the Company may be liable for certain customs transactions, however, the amount of any such potential liability is unknown at this time. The Company is defending its position that Knape & Vogt Canada is the importer of record for all Knape & Vogt goods shipped into Canada and management believes, that based on the information available at this time, any liability owed to the CCRA will not have a material adverse effect on the Companys earnings.
The Company was sued in the Kent County, Michigan Circuit Court in 1997 by a former employee seeking additional benefits under an executive retirement plan. The Circuit Court ruled in favor of the plaintiff, but in June 2002, the Circuit Court was reversed on the Companys appeal to the Michigan Court of Appeals. The plaintiff filed a delayed request for leave to appeal to the Michigan Supreme Court. In August 2002, the plaintiff filed a lawsuit seeking these retirement benefits in the Federal District Court for the Western District of Michigan. During the fourth quarter of fiscal 2003, the plaintiffs request for leave to appeal to the Michigan Supreme Court was denied. The Company moved to dismiss the federal litigation based on the statute of limitations. In September 2003, the Federal District Court dismissed the litigation. In October 2003, the plaintiff filed an appeal to the Sixth Circuit Court of Appeals stating that the statute of limitations should not have applied to this case. Management believes that this case will not have a material adverse affect on the Companys earnings.
The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
(a) | Knape & Vogt Manufacturing Companys Annual Meeting of Shareholders was held on October 17, 2003. |
(b) | Proxies were distributed by Knape & Vogt Manufacturing Company pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was no opposition to managements nominees as listed in the proxy statement and all nominees were elected. |
The vote on the nominees was: | ||||
For | Withheld | |||
John E. Fallon (1)(2) | 15,503,075 | 821,305 | ||
Gregory Lambert (1)(3) | 1,836,182 | 162,891 |
(1) Term expires in 2006. (2) Elected by vote of holders of Common stock and Class B Common stock voting as a class. (3) Elected by vote of holders of Common stock voting as a class. Members of the Board of Directors whose terms have not yet expired are Thomas A. Hilborn, Robert J. Knape and Christopher Norman, terms expiring in 2004 and William R. Dutmers, Richard S. Knape and Michael J. Kregor, terms expiring in 2005. |
Item 6. Exhibits and Reports on Form 8-K
(a) | Exhibits | |
31.1 | Certificate of the Chairman and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
17
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
(Continued)
31.2 | Certificate of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certificate of the Chairman and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certificate of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) | Reports on Form 8-K Knape & Vogt furnished the following Form 8-K during the quarter ended December 27, 2003. |
Date of Report | Filing Date | Items Reported | |
October 23, 2003 | October 23, 2003 | Under Item 9,
this Form 8-K included a press release that reported Knape & Vogts financial results for the
fiscal quarter that ended on September 27, 2003. The press release included summary consolidated financial data for the fiscal quarters ended September 27, 2003 and September 28, 2002. The press release also contained balance sheet information as of September 27, 2003 and June 28, 2003. |
18
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Knape & Vogt Manufacturing Company (Registrant) |
|||
Date: January 21, 2004 | /s/ William R. Dutmers
William R. Dutmers Chairman of the Board and Chief Executive Officer | ||
Date: January 21, 2004 | /s/ Leslie J. Cummings
Leslie J. Cummings Vice President of Finance and Treasurer |
19
EXHIBIT INDEX
Exhibit | Description | |
31.1 | Certificate of the Chairman and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certificate of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certificate of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. | |
32.2 | Certificate of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. |
20
I, William R. Dutmers, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Knape & Vogt Manufacturing Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting; |
Date: January 21, 2004 | /s/ William R. Dutmers
William R. Dutmers Chairman of the Board and Chief Executive Officer |
I, Leslie J. Cummings, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Knape & Vogt Manufacturing Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(c) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting; |
Date: January 21, 2004 | /s/ Leslie J. Cummings
Leslie J. Cummings Vice President of Finance and Treasurer |
I, William R. Dutmers, Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Quarterly Report on Form 10-Q for the three months ended December 27, 2003 which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and |
(2) | the information contained in the Quarterly Report on Form 10-Q for the three months ended December 27, 2003 fairly presents, in all material respects, the financial condition and results of operations of Knape & Vogt Manufacturing Company. |
Date: January 21, 2004 | /s/ William R. Dutmers
William R. Dutmers Chairman of the Board and Chief Executive Officer |
I, Leslie J. Cummings, Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Quarterly Report on Form 10-Q for the three months ended December 27, 2003 which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and |
(2) | the information contained in the Quarterly Report on Form 10-Q for the three months ended December 27, 2003 fairly presents, in all material respects, the financial condition and results of operations of Knape & Vogt Manufacturing Company. |
Date: January 21, 2004 | /s/ Leslie J. Cummings
Leslie J. Cummings Vice President of Finance and Treasurer |